why is the dollar rallying?

[bubba99]

The rise in the dollar is due to China’s intervention.

China has been raising (doubling) the reserve requirements for its central banks for the past month or so. Those reserves must be in dollars. Hence, the banks are buyers of dollars which is supporting the overall internation dollar exchange rates.

It is only fair, now that the US is a socialist state, that China supports our currency.

[stansd]

My job is financial forecasting. The company I work for is big enough to be a reasonable barometer of world economic markets. The currency trends have mirrored almost perfectly the economic ones-the US went into recession about 6 months ago (regardless of what the BEA says). Europe has gone into the tank in the last few months. The currency movements are predictive for what you will soon see in GDP, and it ain’t going to be pretty on either side of the Atlantic.

That said, this stuff about the dollar falling 50-90% are nonsense…It’s as simple as the old big mac index…A big Mac ain’t going to be 10 times as expensive in China in U.S. dollar terms as it is today. PPP is a powerful force, and you won’t see my salary in yuan being identical to a Chinese assembly line worker any time in my lifetime. I’d be surprised if we don’t see significant dollar depreciation given we’ll have to inflate our way out of debt, but it won’t be of that magnitude.

Stan

[stansd]

My job is financial forecasting. The company I work for is big enough to be a reasonable barometer of world economic markets. The currency trends have mirrored almost perfectly the economic ones-the US went into recession about 6 months ago (regardless of what the BEA says). Europe has gone into the tank in the last few months. The currency movements are predictive for what you will soon see in GDP, and it ain’t going to be pretty on either side of the Atlantic.

That said, this stuff about the dollar falling 50-90% are nonsense…It’s as simple as the old big mac index…A big Mac ain’t going to be 10 times as expensive in China in U.S. dollar terms as it is today. PPP is a powerful force, and you won’t see my salary in yuan being identical to a Chinese assembly line worker any time in my lifetime. I’d be surprised if we don’t see significant dollar depreciation given we’ll have to inflate our way out of debt, but it won’t be of that magnitude.

Stan

[stansd]

My job is financial forecasting. The company I work for is big enough to be a reasonable barometer of world economic markets. The currency trends have mirrored almost perfectly the economic ones-the US went into recession about 6 months ago (regardless of what the BEA says). Europe has gone into the tank in the last few months. The currency movements are predictive for what you will soon see in GDP, and it ain’t going to be pretty on either side of the Atlantic.

That said, this stuff about the dollar falling 50-90% are nonsense…It’s as simple as the old big mac index…A big Mac ain’t going to be 10 times as expensive in China in U.S. dollar terms as it is today. PPP is a powerful force, and you won’t see my salary in yuan being identical to a Chinese assembly line worker any time in my lifetime. I’d be surprised if we don’t see significant dollar depreciation given we’ll have to inflate our way out of debt, but it won’t be of that magnitude.

Stan

[stansd]

My job is financial forecasting. The company I work for is big enough to be a reasonable barometer of world economic markets. The currency trends have mirrored almost perfectly the economic ones-the US went into recession about 6 months ago (regardless of what the BEA says). Europe has gone into the tank in the last few months. The currency movements are predictive for what you will soon see in GDP, and it ain’t going to be pretty on either side of the Atlantic.

That said, this stuff about the dollar falling 50-90% are nonsense…It’s as simple as the old big mac index…A big Mac ain’t going to be 10 times as expensive in China in U.S. dollar terms as it is today. PPP is a powerful force, and you won’t see my salary in yuan being identical to a Chinese assembly line worker any time in my lifetime. I’d be surprised if we don’t see significant dollar depreciation given we’ll have to inflate our way out of debt, but it won’t be of that magnitude.

Stan

[stansd]

My job is financial forecasting. The company I work for is big enough to be a reasonable barometer of world economic markets. The currency trends have mirrored almost perfectly the economic ones-the US went into recession about 6 months ago (regardless of what the BEA says). Europe has gone into the tank in the last few months. The currency movements are predictive for what you will soon see in GDP, and it ain’t going to be pretty on either side of the Atlantic.

That said, this stuff about the dollar falling 50-90% are nonsense…It’s as simple as the old big mac index…A big Mac ain’t going to be 10 times as expensive in China in U.S. dollar terms as it is today. PPP is a powerful force, and you won’t see my salary in yuan being identical to a Chinese assembly line worker any time in my lifetime. I’d be surprised if we don’t see significant dollar depreciation given we’ll have to inflate our way out of debt, but it won’t be of that magnitude.

Stan

[peterb]

Credit is being constricted more everyday.This is deflationary as it reduces available money to spend/invest. So does loss of employment. This is causing demand destruction for many things, like RE. Supply and demand forces set market prices. This is why we’re starting to see prices coming down on many things. And as consumer see prices coming down, they tend to wait as time is reducing prices even more. This is considered a deflationary cycle. It takes time to play out as the forces of supply and demand are not always very fluid.

If you look at the last two strongest recessions we’ve had in the last 50 years, prices came down for virtually everything. From 1980 to 1985, the US consumption of oil decreased by ~9%. The price for oil dropped 70%.Gold dropped by 30%. When people stop spending money, the demand is reduced and if the vendor wants to stay in the business, they have to reduce prices to pursuade the buyer to spend. It’s a simple concept and it’s amazing how many things this applies to.
For inflation to increase at this time, we need more money available in the market for people to spend. Or some other part of the world start spending a lot more money. That’s not happening right now. It looks like a global recession is upon us. If a price of something goes up in this market, it is most likely due to demand being stronger than the supply. That’s why the news about OPEC is that they will start cutting supply to hold their prices near $100/bbl. (But I think the only ones who will do it are the Saudi’s)

If the people are too afraid to spend money due to loss of credit and fear of losing their job, the govt will have to step in and take over the job of spending in order to create an inflationary environment. War spending is what got us out of the Great Depression. And I’ll bet we need to see govt spending on a similar scale to get us out of this thing we’re seeing evolve right now.

[peterb]

Credit is being constricted more everyday.This is deflationary as it reduces available money to spend/invest. So does loss of employment. This is causing demand destruction for many things, like RE. Supply and demand forces set market prices. This is why we’re starting to see prices coming down on many things. And as consumer see prices coming down, they tend to wait as time is reducing prices even more. This is considered a deflationary cycle. It takes time to play out as the forces of supply and demand are not always very fluid.

If you look at the last two strongest recessions we’ve had in the last 50 years, prices came down for virtually everything. From 1980 to 1985, the US consumption of oil decreased by ~9%. The price for oil dropped 70%.Gold dropped by 30%. When people stop spending money, the demand is reduced and if the vendor wants to stay in the business, they have to reduce prices to pursuade the buyer to spend. It’s a simple concept and it’s amazing how many things this applies to.
For inflation to increase at this time, we need more money available in the market for people to spend. Or some other part of the world start spending a lot more money. That’s not happening right now. It looks like a global recession is upon us. If a price of something goes up in this market, it is most likely due to demand being stronger than the supply. That’s why the news about OPEC is that they will start cutting supply to hold their prices near $100/bbl. (But I think the only ones who will do it are the Saudi’s)

If the people are too afraid to spend money due to loss of credit and fear of losing their job, the govt will have to step in and take over the job of spending in order to create an inflationary environment. War spending is what got us out of the Great Depression. And I’ll bet we need to see govt spending on a similar scale to get us out of this thing we’re seeing evolve right now.

[peterb]

Credit is being constricted more everyday.This is deflationary as it reduces available money to spend/invest. So does loss of employment. This is causing demand destruction for many things, like RE. Supply and demand forces set market prices. This is why we’re starting to see prices coming down on many things. And as consumer see prices coming down, they tend to wait as time is reducing prices even more. This is considered a deflationary cycle. It takes time to play out as the forces of supply and demand are not always very fluid.

If you look at the last two strongest recessions we’ve had in the last 50 years, prices came down for virtually everything. From 1980 to 1985, the US consumption of oil decreased by ~9%. The price for oil dropped 70%.Gold dropped by 30%. When people stop spending money, the demand is reduced and if the vendor wants to stay in the business, they have to reduce prices to pursuade the buyer to spend. It’s a simple concept and it’s amazing how many things this applies to.
For inflation to increase at this time, we need more money available in the market for people to spend. Or some other part of the world start spending a lot more money. That’s not happening right now. It looks like a global recession is upon us. If a price of something goes up in this market, it is most likely due to demand being stronger than the supply. That’s why the news about OPEC is that they will start cutting supply to hold their prices near $100/bbl. (But I think the only ones who will do it are the Saudi’s)

If the people are too afraid to spend money due to loss of credit and fear of losing their job, the govt will have to step in and take over the job of spending in order to create an inflationary environment. War spending is what got us out of the Great Depression. And I’ll bet we need to see govt spending on a similar scale to get us out of this thing we’re seeing evolve right now.

[peterb]

Credit is being constricted more everyday.This is deflationary as it reduces available money to spend/invest. So does loss of employment. This is causing demand destruction for many things, like RE. Supply and demand forces set market prices. This is why we’re starting to see prices coming down on many things. And as consumer see prices coming down, they tend to wait as time is reducing prices even more. This is considered a deflationary cycle. It takes time to play out as the forces of supply and demand are not always very fluid.

If you look at the last two strongest recessions we’ve had in the last 50 years, prices came down for virtually everything. From 1980 to 1985, the US consumption of oil decreased by ~9%. The price for oil dropped 70%.Gold dropped by 30%. When people stop spending money, the demand is reduced and if the vendor wants to stay in the business, they have to reduce prices to pursuade the buyer to spend. It’s a simple concept and it’s amazing how many things this applies to.
For inflation to increase at this time, we need more money available in the market for people to spend. Or some other part of the world start spending a lot more money. That’s not happening right now. It looks like a global recession is upon us. If a price of something goes up in this market, it is most likely due to demand being stronger than the supply. That’s why the news about OPEC is that they will start cutting supply to hold their prices near $100/bbl. (But I think the only ones who will do it are the Saudi’s)

If the people are too afraid to spend money due to loss of credit and fear of losing their job, the govt will have to step in and take over the job of spending in order to create an inflationary environment. War spending is what got us out of the Great Depression. And I’ll bet we need to see govt spending on a similar scale to get us out of this thing we’re seeing evolve right now.

[peterb]

Credit is being constricted more everyday.This is deflationary as it reduces available money to spend/invest. So does loss of employment. This is causing demand destruction for many things, like RE. Supply and demand forces set market prices. This is why we’re starting to see prices coming down on many things. And as consumer see prices coming down, they tend to wait as time is reducing prices even more. This is considered a deflationary cycle. It takes time to play out as the forces of supply and demand are not always very fluid.

If you look at the last two strongest recessions we’ve had in the last 50 years, prices came down for virtually everything. From 1980 to 1985, the US consumption of oil decreased by ~9%. The price for oil dropped 70%.Gold dropped by 30%. When people stop spending money, the demand is reduced and if the vendor wants to stay in the business, they have to reduce prices to pursuade the buyer to spend. It’s a simple concept and it’s amazing how many things this applies to.
For inflation to increase at this time, we need more money available in the market for people to spend. Or some other part of the world start spending a lot more money. That’s not happening right now. It looks like a global recession is upon us. If a price of something goes up in this market, it is most likely due to demand being stronger than the supply. That’s why the news about OPEC is that they will start cutting supply to hold their prices near $100/bbl. (But I think the only ones who will do it are the Saudi’s)

If the people are too afraid to spend money due to loss of credit and fear of losing their job, the govt will have to step in and take over the job of spending in order to create an inflationary environment. War spending is what got us out of the Great Depression. And I’ll bet we need to see govt spending on a similar scale to get us out of this thing we’re seeing evolve right now.

[stansd]

I can tell you as someone who is very close to how companies respond to the current economic forces that this is simply untrue.

The first part of your argument presumpposes that supply is constant and demand is decreasing. The recessions that you use to illustrate your point were demand driven recessions, but you conveniently leave out the 1970’s, which aremuch akin to what we are seeing now (incidently, in a speech in 2004, Bernanke said the 1973 recession was the most severe since the great depression). You can’t discount the commodity cost pressures that are still rippling through the system.

You are correct that it is as simple as supply and demand. I don’t disagree that demand is shifting left, but so is supply. Where I sit, the supply forces are currently stronger than the demand ones, with the net result being increasing prices, not decreasing. That’s not to say demand won’t go far enough into the tank to reverse this, but we aren’t there yet.

Your argument is highly Keynesian with a bit of monetarist flair…don’t forget the S part of the SD equation. I lean Austrian, and am moving further in that direction given what I’ve seen in the last year.

Stan

[stansd]

I can tell you as someone who is very close to how companies respond to the current economic forces that this is simply untrue.

The first part of your argument presumpposes that supply is constant and demand is decreasing. The recessions that you use to illustrate your point were demand driven recessions, but you conveniently leave out the 1970’s, which aremuch akin to what we are seeing now (incidently, in a speech in 2004, Bernanke said the 1973 recession was the most severe since the great depression). You can’t discount the commodity cost pressures that are still rippling through the system.

You are correct that it is as simple as supply and demand. I don’t disagree that demand is shifting left, but so is supply. Where I sit, the supply forces are currently stronger than the demand ones, with the net result being increasing prices, not decreasing. That’s not to say demand won’t go far enough into the tank to reverse this, but we aren’t there yet.

Your argument is highly Keynesian with a bit of monetarist flair…don’t forget the S part of the SD equation. I lean Austrian, and am moving further in that direction given what I’ve seen in the last year.

Stan

[stansd]

I can tell you as someone who is very close to how companies respond to the current economic forces that this is simply untrue.

The first part of your argument presumpposes that supply is constant and demand is decreasing. The recessions that you use to illustrate your point were demand driven recessions, but you conveniently leave out the 1970’s, which aremuch akin to what we are seeing now (incidently, in a speech in 2004, Bernanke said the 1973 recession was the most severe since the great depression). You can’t discount the commodity cost pressures that are still rippling through the system.

You are correct that it is as simple as supply and demand. I don’t disagree that demand is shifting left, but so is supply. Where I sit, the supply forces are currently stronger than the demand ones, with the net result being increasing prices, not decreasing. That’s not to say demand won’t go far enough into the tank to reverse this, but we aren’t there yet.

Your argument is highly Keynesian with a bit of monetarist flair…don’t forget the S part of the SD equation. I lean Austrian, and am moving further in that direction given what I’ve seen in the last year.

Stan

[stansd]

I can tell you as someone who is very close to how companies respond to the current economic forces that this is simply untrue.

The first part of your argument presumpposes that supply is constant and demand is decreasing. The recessions that you use to illustrate your point were demand driven recessions, but you conveniently leave out the 1970’s, which aremuch akin to what we are seeing now (incidently, in a speech in 2004, Bernanke said the 1973 recession was the most severe since the great depression). You can’t discount the commodity cost pressures that are still rippling through the system.

You are correct that it is as simple as supply and demand. I don’t disagree that demand is shifting left, but so is supply. Where I sit, the supply forces are currently stronger than the demand ones, with the net result being increasing prices, not decreasing. That’s not to say demand won’t go far enough into the tank to reverse this, but we aren’t there yet.

Your argument is highly Keynesian with a bit of monetarist flair…don’t forget the S part of the SD equation. I lean Austrian, and am moving further in that direction given what I’ve seen in the last year.

Stan

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